Thai small and medium-sized enterprises (SMEs) are being urged to brace themselves for disruptive technology and integrate technology in their business models to keep them ahead of the curve after latest findings suggest they are losing competitiveness.
According to Bank of Thailand governor Veerathai Santiprabhob, disruptive technology is presenting a strong challenge to SMEs. Compared with big businesses, the SME sector, which has limited resources, is slower to adapt to changes and the gap in competitiveness continues to widen.
Increasing non-performing loans (NPLs) in SMEs engaged in construction, wholesale and retail businesses are climbing, reflecting that they are losing competitiveness, he said.
“In the face of disruptive technology, SMEs will have to adjust and respond to changes. They will have to use technology more in doing so. It’s not just about investing to increase production capacity any more,” Mr Veerathai said.
“They will have to make use of technology to increase productivity and to respond to changes. Technology will become cheaper.”
Mr Veerathai was speaking at an annual seminar of the chambers of commerce nationwide in Surat Thani, focusing on challenges in the Thailand 4.0 era.
Kalin Sarasin, chairman of the Thai Chamber of Commerce, admitted that SMEs’ bad loans have been rising, particularly in the property sector, but he believed the situation would improve from late this year and next year thanks to the economic recovery.
He said chambers of commerce in 77 provinces had stepped in to help local economies stay competitive and transform into creative economies.
Stressing that SMEs play a vital role in driving economic growth and distributing wealth, the central bank governor also said countries with strong economies are built from SMEs.
Mr Veerathai said applications will play a greater role in business administration from financial planning to inventory to customers relations. He is also calling on SMEs to embrace the sharing economy and put behind the “one man does all” concept.
He cited as an example the success of ride-sharing start-up Uber and online retailer Alibaba, saying Uber does not own a single car while Alibaba does not have to stock its merchandise.
“There are several other SMEs which don’t have offices. They use co-working spaces. Commercial banks use mobile banking services to reach customers without opening new branches,” he said.
Mr Veerathai said information and risk management are also important for SMEs, suggesting that the sector may need to focus more on big data analytics and risks from foreign exchanges.
Less than 30% of SMEs protect themselves against foreign exchange risks, he said.
“In Thailand 4.0, doing business won’t require a lot of money. Businesses can share through digital platforms which can help them expand,” he said.
Mr Veerathai said the ageing society is also posing a challenge to SMEs because consumer behaviour will change. The elderly tend to spend more carefully, particularly on health and tourism.
He said labour will become scarce with workers being replaced by artificial intelligence.
Citing World Economic Forum findings, he said by the year 2020 five million jobs in 15 countries will be eliminated and artificial intelligence technology will be used in some decision-making processes.
Mr Veerathai said the government, as the regulator, will need to make drastic changes to facilitate SMEs by amending or abolishing obsolete laws or regulations and restructuring financial and foreign exchange rules.
More than 3,000 permits cause burdens for SMEs, but not giant businesses, he said. By doing away with some burdensome regulations, several businesses that went bankrupt will be able to start again, he said.
Pichet Durongkaveroj, Digital Economy and Society Minister, said the government is working on a cybersecurity and data protection law to address security in e-payment transactions.